In our February webinar, Jay Manson discussed the downsides of cost/price control and the dilemma of stagnant growth during the economic recovery. Click here to watch the recording "Surviving the Recession to Perish in the Recovery" or to download a copy of his slide deck. Here we review some of the questions which came from the audience.
Q: If a company is only concerned with passing on its increased costs to its customers, isn’t that cost-plus pricing?
Jay: It is cost-plus, and that's the issue. Too many orgnaizations don't have a value-based pricing strategy at all. They're not passing through the margin. The company referred to in my example has done a great job passing through its cost increases to their customers. And like many other companies they've succeeding in recovering revenues to the pre-crisis point, only to see their margins continue to slip (see chart below). Remember, margin is the value you add over and above all the costs, and customers must have clear visibility into that value, or you don't have a chance.
Q: How do you get good data to make a good business case to the customer?
Jay: One of the key pieces of a value-based approach is collaborating with the customer so you understand their perception of value, not your own perception of value. Which one is right? Well, it’s not really relevant who is "correct". It’s what the customer feels comfortable bringing forward. Recently we were working with a large manufacturer in the mid-west. They were using LeveragePoint to build their value propositions. And they brought it home to senior management. We came in with our own hypothesis (of the value of LeveragePoint for them), but it wasn’t until they had changed the numbers themselves that they felt comfortable with it. The best data comes from the customer. You have to ask for it; and you have to ask for it in a way that demonstrates that you’re actually interested in improving their business.
Q: How do you get sales people to adopt a value-based selling approach?
Jay: This is an interesting issue. If you talk about it as being a "value-based selling" approach, a lot of times there's resistance. If you say you want to provide the three or four things that make us better than the competition, and we're goning to help you quantify that, no sales team turns that down. It's what we're all looking for in the marketplace. The challenge around adoption is who's positioning it, as opposed to how it's being used. The top sales teams in most B2B companies are doing something around this. The issue for most sales teams is how to make it systematic. LeveragePoint makes it very easy to make it systematic. There's opportunity to share; you can see how the better people are using it; you can see what works and what doesn't work in terms of winning deals. And for a sales team, it's all about: have you helped me close a deal? Can you help me win? If your application allows you to do that, you're going to win. If your application provides guidelines or controls for salespeople, you'll find the adoption very difficult.
